Winding up of company & legal

provisions

Winding up of company & legal provisions

INTRODUCTION

Winding up of a company is defined as a process by which the life of a company is brought to an end and its property administered for the benefit of its members and creditors.

In words of Professor Gower,

“Winding up of a company is the process whereby its life is ended and its Property is administered for the benefit of its members & creditors. An Administrator, called a liquidator is appointed and he takes control of the company, collects its assets, pays its debts and finally distributes any surplus among the members in accordance with their rights.”

According to Halsburry’s Laws of England,

“Winding up is a proceeding by means of which the dissolution of a company is brought about & in the course of which its assets are collected and realised; and applied in payment of its debts; and when these are satisfied, the remaining amount is applied for returning to its members the sums which they have contributed to the company in accordance with Articles of the Company.”

Winding up is a legal process. Under the process, the life of the company is ended & its property is administered for the benefits of the members & creditors.

A liquidator is appointed to realise the assets & properties of the company. After payments of the debts, is any surplus of assets is left out they will be distributed among the members according to their rights.

Winding up does not necessarily mean that the company is insolvent. A perfectly solvent company may be wound up by the approval of members in a general meeting.

There are differences between winding up and dissolution. At the end of winding up, the company will have no assets or liabilities. When the affairs of a company are completely wound up, the dissolution of the company takes place.

On dissolution, the company’s name is struck off the register of the companies and its legal personality as a corporation comes to an end.

Legal provisions for Winding Up of Companies

Section 2(94A) of the Companies Act 2013 provides the following definition of Winding up.

Winding up” means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable.”Winding up” means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable.

The procedures for Winding up of companies are provided under Chapter XX of the Companies Act, 2013 and Insolvency and Bankruptcy Code of India 2016.

The Insolvency and Bankruptcy Code, 2016 is an act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons,

to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.

The Insolvency and Bankruptcy Code, 2016 (IBC) was passed by the Parliament on 11 May 2016, received Presidential assent on 28 May 2016 and was notified in the official gazette on the same day.